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Insider share buying can’t stop the Starpharma share price sliding again today

The Starpharma Ltd (ASX: SPL) share price is 9% lower today to change hands for just 90 cents after a near on 30% collapse yesterday on the back of news that the US regulator the FDA rejected its application to approve its VivaGel BV product for sale in the U.S.

However, in some good news for shareholders it’s been revealed that yesterday a Starpharma director and insider, Robert Thomas, bought 50,000 shares for $47,000 on market at 96 cents per share.

This suggests Mr. Thomas at least has faith the biotech will eventually get its VivaGel BV product approved in the U.S., although the pathway ahead now is unclear as Starpharma has admitted the FDA requires “more clinical data” prior to approval.

It appears investors are taking a sell first, ask questions later approach though as management’s credibility has been hurt by the FDA rejection as many in the market believed Starpharma had the clinical data already to secure approval.

The uncertainty over the situation now is likely to keep a lid in the share price until management provides a further update or proper roadmap to approval.

Starpharma does have plenty of potential on paper at least via its drug delivery technology and products already in market and is well funded with $49.5 million cash on hand. However, whether it can translate this potential into profits remains to be seen as investors are largely reliant on the worth of management’s guidance on the science as to the company’s potential.

For example many biotechs in the research and development space often just end up destroying investor capital such as Admedus Ltd (ASX: AHZ), Prana Biotechnolgy Ltd (ASX: PBT), Mesoblast limited (ASX: MSB) and Acrux Limited (ASX: ACR).

In fact as far as I can remember Sirtex Medical is the only start-up type biotech or healthcare business to list and go on to become a roaring success by posting big profits for investors. So there can be exceptions to the rule, but they are unusual.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.